One of the most important tax and payroll issues a company has to address is who is an actual employee and who is an independent contractor. But once you have that worked out, your next step is making sure each category of workers gets the right forms. True employees get Form W-2 each year, and freelancers — independent contractors — get Form 1099-MISC. This form can be used for a variety of payments, and one of the most common and significant uses is for independent contractors.
You must issue a Form 1099-MISC to each nonemployee you pay $600 or more during the year, and this is a requirement for all trades or businesses. For the purpose of this form, even a nonprofit is considered a trade or business. Federal, state and local governments also have to issue these forms.
The adaptable Form 1099-MISC is also required in a variety of payments to corporations:
However, except for the specified corporate payments, Form 1099-MISC is not typically used for corporate payments. Indeed, there are many payments for which Form 1099-MISC is not appropriate:
If you’re not sure which form to use, and when, give us a call. We’ll be happy to help you sort out the details.